Cheat Sheet: Sepa

What's that?
Back in 2000, European political big wigs got together in Lisbon. By the end of their jaunt in the sun, they decided the EU would be one of the world's leading knowledge-based economies by 2010 - a plan that has become known as the Lisbon Agenda.

Out of this stemmed the idea to support innovation and the idea of a single market by making it easier and cheaper to move money around the EU.

The EC decided that cross-border payments should cost no more than domestic payments and in 2002 the European Payments Council (a group of banks) sketched plans for how this would be done.

Thus the Single European Payments Area (Sepa) was born.

What will it mean?
Basically it means fewer charges on transactions and purchases. On the consumer side of things, if Sepa comes into being by 2010, it could mean you'll be able to buy things on your card in another European country and pay nothing more than you would domestically.

On the business side, it'll basically mean the same thing but moving money around should be as cheap as it is domestically. This means banks will have to sharpen up their IT systems, to replace manual processes with automatic ones in order to bring down costs.

Sepa will also mean that European-wide card issuers can compete with domestic card firms. Sepa is probably going to be built around EuroPay MasterCard Visa (EMV) card technology to ensure security and interoperability at the acceptance point.

How will it happen?
Aye, there's the rub. The thing is the banks don't really know what they should do as wise men at the EC in Brussels haven't issued any strict guidelines. A lot has been left to interpretation.

Saying that, Voca, the payments organisation formally known as Bacs, is already revamping its infrastructure to accommodate future demands of Sepa. Analysts have also predicted banks will have to spend money quite fast to hit the 2010 deadline.

After all, making all European businesses and all banks sing from the same song sheet isn't going to be easy.

What should I do to be to prepare for Sepa?
Basically, get ready to buy technology and think Europe-wide.

Is it all smooth sailing?
As mentioned, it could cost a lot for banks to get up to scratch but the benefits will be that banks can compete for customers anywhere in Europe.